DoJ Gets Its 1st FATCA Conviction!

DoJ announced on May 9, 2016, that Gregg R. Mulholland, a dual U.S. and Canadian citizen of San Juan Capistrano, California and Vancouver, Canada, Age: 46

and secret owner of Legacy Global Markets S.A. (Legacy), an offshore broker-dealer and investment management company based in Panama City, Panama, and Belize City, Belize, pleaded guilty to money laundering conspiracy for fraudulently manipulating the stocks of more than 40 U.S. publicly-traded companies and then laundering more than $250 million in profits through at least five offshore law firms. When sentenced, Mulholland faces up to 20 years in prison.

Prospective money launderers should take note of Mr. Mulholland’s conviction and think twice about the consequences of such actions.

The same holds true for individuals who attempt to criminally circumvent IRS reporting requirements regarding foreign accounts, as their actions will attract the attention of IRS-Criminal Investigation.”

Between 2010 and 2014, Mulholland controlled a group of individuals (the Mulholland Group) who together devised three interrelated schemes to:

Induce U.S. investors to purchase stock in various thinly-traded U.S. public companies through fraudulent promotion of the stock, concealment of their ownership interests in the companies, and fraudulent manipulation of artificial price movements and trading volume in the stocks of those companies;

Launder the fraudulent proceeds from the stock manipulation schemes to and from the United States through five offshore law firms. Through these schemes, the Mulholland Group laundered more than $250 million in fraudulent proceeds.

To facilitate the interrelated schemes, the Mulholland Group used shell companies in Belize and Nevis, West Indies, which had nominees at the helm. This structure was designed to conceal the Mulholland Group’s ownership interest in the stock of U.S. public companies, in violation of U.S. securities laws, and enabled the Mulholland Group to engage in more than 40 “pump and dump” schemes. Mulholland used the services of a U.S.-based lawyer to launder the more than $250 million generated through his stock manipulation of CYNK and other U.S. companies – directing the fraud proceeds to five law firm accounts and transmitting them back to members of the Mulholland Group and its co-conspirators. These concealment schemes also enabled Mulholland to evade reporting requirements to the IRS.

According to the indictment, the defendants’ scheme also enabled U.S. clients to evade reporting requirements to the IRS by concealing the proceeds generated by the manipulated stock transactions through the shell companies and their nominees.

Although the Justice Department has been aggressively targeting offshore tax evasion by U.S. taxpayers since 2009, this case represents the first time that the government has brought criminal charges based upon alleged violations of FATCA. With FATCA’s provisions only becoming effective on July 1, 2014, and with the Justice Department’s offshore crackdown showing no signs of slowing down, we expect to see more criminal prosecutions in the future alleging violations of FATCA’s provisions.